Yesterday I seen an article about a guy who spend $1 million dollar to bet Bitcoin Call Option, thinking that Bitcoin price will be at least $50,000 and target at $100,000 next year, I am very curious about the mathematic behind this
Original news
https://www.wsj.com/articles/a-million-dollar-bet-that-bitcoin-will-hit-50-000-1513809578?mod=e2tw
Call Option is a very complicated gambling contract where what this guy bought is a contract that allow him to buy 275 Bitcoin at $50,000 each
You must be thinking how stupid this guy was who want to pay $1 million dollar to buy a contract that allow him to buy Bitcoin at $50,000 each since Bitcoin is now only $15,000 each
Let us compare the difference
- Buy Bitcoin directly
Buy 275 Bitcoin with current price of $15,000 and pay $4 million dollar
At the end of year 2018
If Bitcoin reach $0, lose $4 million dollar
If Bitcoin reach $50,000, earn $9 million dollar
If Bitcoin reach $75,000, earn $16 million dollar
If Bitcoin reach $100,000, earn $23 million dollar
risk/reward ratio = $23 million/$4 million
= 6
- Buy Call Option
Spend $1 million buying the call option
At the end of year 2018
If Bitcoin reach anything below $50,000, lose $1 million dollar
If Bitcoin reach $50,000, lose $1 million dollar
If Bitcoin reach $54,000, break even
If Bitcoin reach $75,000, (each earn $25,000) total earn $6 million dollar
If Bitcoin reach $100,000, (each earn $50,000) total earn $12 million dollar
risk/reward ratio = $12 million/$1 million
= 12
Conclusion:
See the difference? If he buy directly he would need to spend $4 million dollar and max win is 6 times but if he buy call option he only need to spend 1/4 which is $1 million dollar and get the max win of 12 times
But seriously I still think this call option suck, because Bitcoin price of below $50,000 he would lose $1 million dollar, and if he buy directly he would not lose any money as long as the price above $15,000. I think what he really want is the 12x but if he just buy directly he can sleep better at night even though the max return is just 6x, I would never buy this kind of call option
thanks for reading
昨天看到新闻有人用$1百万美金来赌Bitcoin Call Option，说Bitcoin明年会超过$50,000美金目标是$100,000，很新奇一下，到底是怎么赌法
原文
https://www.wsj.com/articles/a-million-dollar-bet-that-bitcoin-will-hit-50-000-1513809578?mod=e2tw
Call Option对新手来说是很复杂的对赌合约，基本上他的赌法是在2018年结束之前，拥有这张call option合约的人可以随时购买275个Bitcoin，每个$50,000
读到这里是不是觉得付$1百万那个人是大傻瓜？现在Bitcoin才不到$15,000，何必用$50,000 来买呢？
不过让我们来比较一下分别
- 直接买卖Bitcoin
直接买275个Bitcoin，每个需要$15,000，总共需要$4百万美金
到了2018年尾，
如果Bitcoin归0， 亏$4百万美金
如果Bitcoin到$50,000，赚$9百万美金
如果Bitcoin到$75,000，赚$1千6百万美金
如果Bitcoin到$100,000，赚2千3百万美金
risk／reward ratio ＝ 2千3百万美金／$4百万美金
＝ 6
２。用Call Option来赌Bitcoin
花$1百万来赌Call Option
到了2018年尾，
如果Bitcoin$50,000以下， 亏$1百万美金
如果Bitcoin刚好到$50,000，亏$1百万美金
如果Bitcoin到$54,000，赚０
如果Bitcoin到$75,000，（每个赚$25,000）总赚6百万美金
如果Bitcoin到$100,000，（每个赚$50,000）总赚1千2百万美金
risk／reward ratio ＝ 1千2百万美金／$1百万美金
＝ 12
结论：
看到分别了吗？如果直接买，需要花4百多万，最多赢6倍，可是赌call option，能用1/4的钱也就是1百万而已，输的话输1百万，赢的话12倍
不过其实我个人觉得这种赌法还是风险太大，比如如果价格只到$50,000或以下就得亏$1百万，如果直接买的话，只要超过$15,000就不用赔了，不过买那张call option的人一来是只想赌1百万来赚1千两百万，而且信心满满，是不是数学算错了？如果他用1百万来直接买的话，到了$100,000他还是可以赚6倍也就是6百万啊，而且又不用提心吊胆,反正这种赌法我是绝对不会去赌的
明年再看结局如何吧，谢谢阅读